Cybersecurity firms' earnings set to benefit from growing threat of hacks

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Item 1 of 2 3D printed models of people working on computers and padlock are seen in front of a displayed CYBER SECURITY words and binary code in this picture illustration taken, February 1, 2022. REUTERS/Dado Ruvic/Illustration
[1/2]3D printed models of people working on computers and padlock are seen in front of a displayed CYBER SECURITY words and binary code in this picture illustration taken, February 1, 2022. REUTERS/Dado Ruvic/Illustration Purchase Licensing Rights, opens new tab
May 22 (Reuters) - Top U.S. cybersecurity companies are expected to report another quarter of strong growth as high-profile hacks and a shift in client preference for bigger players with better integrated offerings help support their businesses in a turbulent economy.
Palo Alto Networks (PANW.O), opens new tab, the largest player in the space by market share and valuation, will kick off sector earnings on Tuesday with what analysts polled by Refinitiv estimate to be a near 24% increase in quarterly revenue.
That compares with growth of almost 26% in the prior quarter and 29% a year earlier, underscoring the resilience in demand for the services, seen as essential despite a wider tech spending slowdown.
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"Cybersecurity has become more crucial than ever due to the rapid digital transformation taking place across industries," said Akshara Bassi, an analyst at Counterpoint Research.
More frequent cases of security threats have also boosted demand. In recent months, Western Digital (WDC.O), opens new tab and the U.S. Transportation Department faced breaches that exposed the information of the memory chipmaker's customers and 237,000 U.S. government employees.
Worldwide spending on cybersecurity solutions is expected to rise 12.1% to hit $219 billion in 2023, according to data from market analytics firm International Data Corporation.
Analysts said enterprise customers were also consolidating their cybersecurity software vendors in a bid to reduce the complexity of their operations and safeguard themselves from attacks.
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Vendors that are a one-stop shop for cybersecurity solutions help their clients analyze security data better as well as integrate a variety of applications, optimize costs and improve risk management.
Top cybersecurity providers Palo Alto Networks, CrowdStrike Holdings (CRWD.O), opens new tab and Fortinet Inc (FTNT.O), opens new tab, which offer a range of services including cloud and identity protection, are set to benefit from the consolidation trend, said D.A. Davidson analyst Rudy Kessinger.
CrowdStrike and ZScaler Inc (ZS.O), opens new tab are expected to report revenue growth of 39% and 45% when they report earnings on May 31 and June 1, respectively.
Check Point Software Technologies (CHKP.O), opens new tab and Fortinet Inc (FTNT.O), opens new tab reported upbeat results earlier this month as demand for firewall and cloud security products held strong.
Palo Alto Networks, Fortinet lead cybersecurity stocks in the past year

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Reporting by Vansh Agarwal, Samrhitha Arunasalam and Akash Sriram in Bengaluru; Editing by Shinjini Ganguli

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Samrhitha Arunasalam reports on the technology industry at Reuters with a focus on media and telecom companies in the United States and Canada. She covers a raft of developments including blockbuster deals, big tech layoffs, management changes, quarterly earnings and the latest in the world of artificial intelligence. Her stories usually appear in the Technology and Media and Telecom sections. Samrhitha graduated from Cardiff University with a degree in Journalism.

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